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Wednesday, July 24, 2013

2.Sub topics
Meaning
Features with examples
Degree of inflation
Causes –demand and supply side
Effects
Measures-monetary and fiscal measures

3.Meaning
a sustained increase in the general price level leading to a fall in the purchasing power or value of money
The result of inflation is that the nominal amount of goods and services that a unit of currency can purchase (its purchasing power) declines over time.

4.Features +examples
To be called as ‘inflation’ , it should sustain for at least more than a day, week or month and the rise in price level must be somewhat substantial
The unfortunate result of the inflation is "spiral".
Inflation is stated as a percentage

5.Degree of inflation
Creeping
Trotting
Hyperinflation
Running

6.Causes of inflation
The inflation taking place due to demand pressures is known as Demand pressures is known as Demand--Pull Inflation.
Increase in the overall price level due to cost-- pressures is known as Cost--Push or Supply Push or Supply-side

9.Effects of inflation
1.Effects on redistribution of income and wealth
2. Effects on production
3. Misallocation of resources
4. Changes in the process of transactions
5.Reduction in production
6.Black marketing, hoarding etc
7. Reduction in savings
8. Fall in quality
9.Encourages speculation
10. Hinders foreign capital